Sunday, March 16, 2014

There is more than one reason why
Russia is interested in Crimea and the Ukraine just as there is more than one reason why the United States is so interested in the imposition of economic sanctions. One of the reasons is likely related to
the potential for oil and natural gas reserves on and adjacent to the Crimean
Peninsula and onshore in both Eastern and Western Ukraine, a topic that received little attention from the world's media until
the geopolitical situation in Ukraine started to heat up.

Back in the Soviet days, the oil
industry discovered indications of hydrocarbons, however, productivity was
poor. Flow rates were low and were considered subeconomic given that the
porosity in the fractured reservoirs was low. With recent advances in
production techniques, the potential to produce hydrocarbons from these tight
reservoirs has increased substantially, particularly with the use of fracking
to produce natural gas and condensate from shale reservoirs.

There are two key areas for
potential hydrocarbon accumulations in Ukraine; offshore in the Black Sea
around Crimea and onshore in both eastern and western Ukraine.

Here is a map showing the key oil
and gas exploration and development areas in the Black Sea, noting the Crimean
Peninsula in the top right side of the screen capture:

Here is a close up showing the key
Ukrainian offshore exploration licences:

Just prior to the collapse of the
Yanukovych government, Ukraine was very close to signing a $735 million production-sharing agreement
with ExxonMobil and Royal Dutch Shell. The deal would have seen two wells
drilled off the southwest coast of Crimea in the Skifska area. The
operators were optimistic that even though no drilling had taken place in this
block, a recent natural gas discovery in the Romanian part of the Black Sea
could be a harbinger of economic reserves in the Skifska licence. Going
back further, in 2012, the two companies along with Romania's
OMV Petrom and Ukraine's state-owned Nadra Ukrainy were picked to spend between
$10 and $12 billion to develop the Skifska field which is projected to have
reserves of between 7 and 8.8 Tcf and would have produced about 175 Bcf per
year over a 50 year production sharing deal, reducing Ukraine's very heavy
dependence on imported natural gas from Russia. Not surprisingly, the
deal was contested by Russia's Lukoil.

Not surprisingly, ExxonMobil announced in early March 2014 that further
activity on its Skifska licence were on hold until the political situation in
Ukraine was resolved.

Now, let's look at the onshore
hydrocarbon resource potential. According to the United States Energy Information Administration,
Ukraine has Europe's third largest unproved, technically recoverable shale gas reserves after Poland and France as shown on this chart:

Shale gas in
Ukraine is located in two main areas; Yuzivska located in Eastern Ukraine and
Olesska located in Western Ukraine. According to EIA's 2013 shale gas
report, Ukraine has 128 Tcf of natural gas and 0.2 billion barrels of oil in
its shale gas fields located in the black shales of the Deniepr - Donets Basin
in Eastern Ukraine, the basin which accounts for most of Ukraine's onshore
petroleum reserves and the organic rich shales of the Carpathian Foreland
Basin in Western Ukraine as shown on this map:

Here is a closeup of the Dnieper -
Donets Basin showing the areas in Ukraine that are prospective for oil, wet gas
or condensate and dry gas:

Ukraine State Service of Geology and
Mineral Resources announced that shale gas reserves in the country totalled 247
Tcf. If this were the case, Ukraine alone would have just over half of the total shale gas reserves among all European nations that were not formerly part of the Soviet bloc.

In May 2012, Ukraine picked Shell
and Chevron Corp. to explore and develop two potential onshore shale gas
fields in Western and Eastern Ukraine.

In Western Ukraine, Chevron will initially invest $350 million annually with a total
investment of around $10 billion. A 50 year production sharing agreement was signed in November 2013. The Olesska (or Oleskaya) shale
reserves, located in western Ukraine, are estimated to be roughly 53 Tcf
according to the Ukraine government and could produce up to 350 Bcf annually.
The field is located along strike with Poland's Lublin Basin where
Chevron already has shale licences. Here is a map showing the location of the
Lublin Basin and where it borders with Ukraine:

Here is a map from Chevron showing their areas of interest in Ukraine, Poland and Romania:

In mid-January 2014, Chevron announced that it would start producing gas by
the end of 2014.

Ukraine also signed a contract with Royal Dutch Shell to
explore shale gas potential on the Yuzivska block in Eastern Ukraine. This area is estimated
to have between 71 and 107 Tcf of shale gas and Shell has made an initial
spending commitment of $200 million in the first stage of exploration and an anticipated minimum of $10 billion (and up to $50 billion) over the 50 year life of the agreement. Shell expects to start production from the Yuzivska block in 2015.

Interestingly, in June 2013, Ukraine's Prime Minister Mykola Azarov
claimed that Ukraine would be natural gas self-sufficient within 10 years and
that it would be able to export some gas as well by the mid-2020s. With
Ukraine currently getting over two-thirds of its natural gas from Russia and
being Russia's second largest natural gas customer, one has to wonder how much
of a role recent oil industry activity in Ukraine and Crimea, in particular,
have played in Russia's current political moves in the area. With major international oil companies about to break Russia's near monopoly on natural gas in Ukraine, would one have to think that Russia and Gazprom would feel somewhat threatened. When one looks at how many deals Ukraine has signed with multinational oil , particularly American companies, in the past two years, the timing of Russia's return to the Ukraine and American intervention in the situation seems more than coincidental.

more to the point the usa and eu stirred this up once again based on oil, just as with most of the conflicts in the last 20 years, we were lied to over Afghanistan when they said they would destroy the poppy fields to hit the drug trade, they did notdo it and now more drugs flood Europe than ever before, they also failed to mention all the minerals in Afghanistan to be reaped, and now massive oil deposits not mentioned in mosteu and us news reports recently. Russia is doing nothing morethe usa and eu have done in other places, but at least the population there is mainly Russian and wanted them not the obvious manipulated and corrupt (aided by US and EU officials)illegal minority government which stepped in by force recently.I see this as just another easily recognisable step in a patternthat began after 1945

You have done your research I see. Nice to see someone looking beyond the shameful mass media lies we are being spoon fed. There are way to may Fox news watchers out there.What is scary is they eat it up like kids eat candy. There are none so blind, then those, who refuse to see. Keep up the good work.

I must say that, while these potential discoveries of natural resources are likely an important driver in Putin's moves, I don't believe they're the only one. There's nothing new in Russia asserting its influence over the Black Sea and the Caucasus, and throughout History it has been mostly due to economic and military advantages. Let's not forget what a huge importance this area had in WW2, where most of the activity in 1942 and 1943 happened around here. At that time, the control of the Black Sea and the oil from Baku were the reaons behind the stubborn (read desperate) Soviet resistance to the German advance.

Take Ukraine out of the Russian sphere of influence, and it will not be long before Kazakhstan, Georgia, Azerbaijan and others start to look seriously at shaking out the big neighbour in the North. Putin would never tolerate that.

Russia's wealth (made out of gas and oil) is likely a big factor, but don't count out Russia's pride.

I stopped following you a while back as I thought you had quit blogging. Am I glad to find you today. Since I have lived in Ukraine now for 7 years, the current situation scares hell out of me, especially when the "America is the ONLY source of all the world's evils" idiots start shooting of their mouths.

The Oxford Institute for Energy Studies wrote a report on the "US Shale Gas and Tight Oil Industry Performance: Challenges and opportunities". In summary, fracking for shale gas is a money losing venture. It does not pay. The New Eastern Outlook claims in its article, "White House Lies to EU about US Gas Supply" shows the major players exiting fracking and shale gas recovery because the 'shale gas revolution' in the USA has failed. Major players like Shell and BP are exiting and hugely reducing its exposure. The same will happen in the Ukraine. At current prices, it is NOT economical.

As it goes - you might be righthttp://www.dailymail.co.uk/news/article-2627424/VP-Bidens-son-joins-Ukraine-gas-companys-board.html.The only thing you might be wrong about - that these games are geo-politics..

We're the only ideal B1 business visa service providers with Hyderabad. All of us help make all of the luxuries to your consumers to acquire b1 and b2 business visa. For virtually any requests about B1 and B2 business visa it is possible to specifically consult people inside Hyderabad, even as include the best professionals service providers throughout Hyderabadb1 visa hyderabad

Subscribe To

About Me

I have been an avid follower of the world's political and economic scene since the great gold rush of 1979 - 1980 when it seemed that the world's economic system was on the verge of collapse. I am most concerned about the mounting level of government debt and the lack of political will to solve the problem. Actions need to be taken sooner rather than later when demographic issues will make solutions far more difficult. As a geoscientist, I am also concerned about the world's energy future; as we reach peak cheap oil, we need to find viable long-term solutions to what will ultimately become a supply-demand imbalance.